Friday, August 20, 2010

Debt is not bad, only bad debtors.

The one thing that has shitted me (well apart from the leaders, the debates, the inept management from both party's machines, the lack of vision, the inability to do anything without having it focused grouped or polled, of fuck it, everything....) has been the debate on debt.


Basic economics. Supply and demand.

If there is too much money in the economy, the value of it goes down. We call this inflation. That is fucking bad, but only if it running high. Low inflation means the economy is growing. Which is why the RBA has a target figure of 2-4% inflation.

There is to ways to manipulate inflation. One is to increase interest rates. The other is to reduce the amount of money in the economy.

Which is why the RBA has been willing to press the button on interest rates, even during election campaigns. Why?


The Liberal fuck heads took fiscal policy (the government budget process) out of the interest game. Because the government can also reduce the supply of money by BORROWING?

Governments borrow by issuing bonds. This is a good thing, as they are a very secure investment. The bonds are backed by the government, and the last time a Government fucked around with bond repayments (Jack Lang's NSW Govt), the Governor fired his comm's arse!

By selling federal bonds locally, a government can reduce the money flowing in the economy. It can also use the bond money to fund long term infrastructure which is to risky for private enterprise to do. AND THIS IS WHY FEDERAL INFRASTRUCTURE IS SO FUCKED! By not raising debt, Costello was not willing to fund the big ticket items the nation needs.

Now, note, that big government debt is really bad. Hyperinflation, risk of defaulting loans and other such things  does not make a nation stable. I point to the USA on how unstable hyper debt can be.

We don't have this problem. If anything, we have too much cash sitting around doing nothing. I personally like the idea of the future fund, but I would like governments and private enterprise to tap into it to fund projects. And I expect them to pay back the money in interest. Thats how banks make their money.

So, as I tweeted, if anyone tells you that Government debt is bad, castrate them. They should never be allowed to breed, or at least screw around on a parliamentary salary. Because they are fucking stupid.

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